ON-POINT TECHNOLOGY SYSTEMS, INC.
1370 WEST SAN MARCOS BOULEVARD, SUITE 100
SAN MARCOS, CALIFORNIA 92069
To Our Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
On-Point Technology Systems, Inc., to be held at the Company's corporate office
located at 1370 West San Marcos Boulevard, Suite 100, San Marcos, California
92069 on Thursday, July 29, 1999, at 10:30 a.m. local time.
The matters expected to be acted upon at the meeting are described in detail in
the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
A proxy, as well as a copy of the Company's Annual Report for the year ended
December 31, 1998 and the Form 10-QSB for the quarter ended March 31, 1999 are
included along with the Proxy Statement. These materials are being sent to
shareholders on or about July 9, 1999. During the meeting, we will also report
on the operations of the Company and the changes since our last Annual Meeting
It is important that your shares be represented at the Annual Meeting, whether
or not you plan to attend. Accordingly, please take a moment now to complete,
sign, date and mail the enclosed proxy.
Thank you for your support and we look forward to seeing you at the meeting.
Sincerely,
Frederick Sandvick
Chairman of the Board and
Chief Executive Officer
July 9, 1999
<PAGE>
ON-POINT TECHNOLOGY SYSTEMS, INC.
1370 WEST SAN MARCOS BOULEVARD, SUITE 100
SAN MARCOS, CALIFORNIA 92069
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The Annual Shareholders' Meeting (the "Meeting") of On-Point Technology
Systems, Inc. will be held at the Company's corporate office located at 1370
West San Marcos Boulevard, Suite 100, San Marcos, California 92069 on July 29,
1999, at 10:30 a.m. local time, for the purpose of considering and acting upon:
(1) the election of three directors to serve as the Board of Directors
until the next Annual Meeting of Shareholders and their successors are
elected and qualified;
(2) a proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors of On-Point Technology Systems, Inc. for the current
fiscal year; and
(3) such other business as may properly come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 28, 1999 as
the record date for determining shareholders entitled to notice of and to vote
at the Meeting. Only shareholders of record at the close of business on that
date are entitled to vote at the Annual Meeting and any adjournment thereof.
By order of the Board of Directors,
San Marcos, California Frederick Sandvick
July 9, 1999 Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
AND YOU ARE URGED TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY REVOKE THE PROXY AND VOTE IN PERSON
IF YOU SO DESIRE.
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of On-Point Technology Systems, Inc. (the "Company") of
proxies to be voted at its Annual Meeting of Shareholders (the "Meeting") to be
held on July 29, 1999, and at any adjournment or adjournments thereof.
The Board requests that all shareholders complete the enclosed proxy card
and sign, date and return it as promptly as possible. Since many shareholders
cannot personally attend, it is necessary that a large number be represented by
proxy. The holders of record of a majority of the outstanding shares must be
represented in person or represented by proxy at the Annual Meeting in order to
hold the Meeting.
Any shareholder returning a proxy may revoke it by casting a ballot at the
Meeting. Any proxy not revoked will be voted as specified by the shareholder.
If no choice is indicated, a proxy will be voted in accordance with the Board
of Directors' recommendations.
The Company's Bylaws require an affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and
entitled to vote for approval of each item listed on the proxy card and
described herein.
At June 28, 1999, the record date, there were 10,216,301 shares of the
Company's Common Stock outstanding and entitled to one vote each at the Annual
Meeting. These shares were registered in the names of 282 shareholders and were
owned beneficially by approximately 2,400 shareholders. As of June 28, 1999,
Robert L. Burr owned 7,904 shares registered in his name, 35,556 shares held as
community property with Catherine Winchester-Burr and 691,122 shares held by
the Burr Family Trust. Mr. and Mrs. Burr, as trustees of the trust, exercise
sole voting and investment control over these shares. The Company knows of no
other person or group who is beneficial owner of more than 5% of its issued
and outstanding common stock.
This proxy statement is being mailed on or about July 9, 1999.
PROXY ITEM NO. 1
ELECTION OF DIRECTORS
Three (3) directors are to be elected at the Annual Meeting to hold office
from their election until the next Annual Meeting of Shareholders or until
their successors are duly elected and qualified. Of the current Board of
Directors, Ed M. Bacani has decided not to stand for reelection as a director.
The following nominees have been proposed by the Board of Directors.
The Board of Directors recommends a vote FOR the election of these
nominees.
Frederick Sandvick has been Chairman of the Board and Chief Executive
Officer of the Company since January 1996. Mr. Sandvick is President and
principal stockholder of Vanguard Strategies, Inc., a privately held strategic
planning company he founded. From 1990 to 1995, Mr. Sandvick was Executive
Vice President and Chief Financial Officer of Jackpot Enterprises, Inc., a
New York Stock Exchange listed company in the gaming/entertainment industry.
Prior to Jackpot Enterprises, Inc., Mr. Sandvick was a partner with J.H. Cohn
& Company, a public accounting firm. Mr. Sandvick is a licensed attorney and
certified public accountant. Mr. Sandvick is the half brother of John H.
Olbrich. Mr. Sandvick is 41 years old.
John H. Olbrich has been the owner and President of U.S. Mortgage Bankers
Corporation, a residential mortgage brokerage firm, since 1991. Mr. Olbrich
has been in the real estate mortgage business for approximately 12 years.
Mr. Olbrich was appointed to the Board in July 1996. Mr. Olbrich is
Mr. Sandvick's half brother. Mr. Olbrich is 37 years old. See "Certain
Relationships and Related Transactions," herein.
<PAGE>
Richard C. Mahan has been the chief executive officer and managing partner
of Mahan & Nash, a full service management consulting firm, since 1989.
Prior to forming Mahan & Nash, Mr. Mahan served as Vice President and
Assistant to the Chairman of the Board of Shapell Industries, one of the
largest real estate developers in the United States. From 1982 through
1986, Mr. Mahan served as Executive Director of California's "Little
Hoover Commission," which develops and presents recommendations to state
and local governments on how they can benefit from applying private sector
business principles to their organizations. Mr. Mahan is 47 years old.
Board Meetings and Committees of the Board
The Board of Directors held three regular meetings during 1998. Each
director who served during 1998 attended at least 75% of the meetings of the
Board of Directors and any committee of which he was a member held during his
term in office.
An Audit Committee was formed in 1993 and currently consists of Mr. Bacani
and Mr. Olbrich. The Audit Committee reviews external and internal audit plans
and activities, reviews the Company's annual financial statements, reviews the
Company's system of internal financial controls and recommends to the Board the
annual selection of independent auditors. A Compensation Committee was also
formed in 1993 and currently consists of Mr. Bacani and Mr. Olbrich. The
Compensation Committee is responsible for reviewing and establishing policy
regarding salary and other forms of compensation for the Company's executive
officers. During 1998, the Audit Committee held one meeting and the
Compensation Committee held two meetings. Mr. Mahon will replace Mr. Bacani on
both committees upon his election to the Board.
Directors' Compensation
Outside directors are automatically granted 10,000 shares of the Company's
common stock pursuant to the July 26, 1996 Amendment to the 1994 Stock
Option Plan for Directors which provided a formula for granting options to
outside directors. In addition, each continuing outside director receives
an additional grant of 10,000 shares of the Company's common stock in lieu of
cash compensation for serving as director pursuant to the August 28, 1998 and
August 27, 1997 Amendments to the 1994 Stock Option Plan for Directors which
modified the formula for granting options to outside directors by providing for
the grant of options in lieu of cash compensation for serving as director.
Mr. John Robinson, a director during 1997, was paid $2,500 in March 1998 for
services as a Director during the period July 26, 1996 through August 27, 1997
pursuant to the compensation arrangement in effect during this service period.
1994 Stock Option Plan for Directors
On April 21, 1994, the Company adopted the 1994 Stock Option Plan for
Directors (the "Directors' Plan") under which 525,000 shares of common stock
May be issued to directors of the Company. Options issued under the
Directors' Plan are non-qualified stock options. Prior to the Amendments to
The Directors' Plan described below, the Board of Directors, excluding outside
directors who are eligible for the Directors' Plan, subject to the provisions
of the Directors' Plan, had authority to determine the outside directors to
whom options would be granted, the time or times at which options would issue,
the exercise price of granted options and any conditions for their exercise.
The Directors' Plan requires that the exercise price of stock options be not
less than the fair market value on the date of grant and that stock options
expire not later than ten years from the date of the grant. The Directors'
Plan contains an anti-dilution provision whereby the shares of common stock
which underlie outstanding options are increased proportionately in the event
of a stock split or dividend.
On July 26, 1996, the Board amended the Directors' Plan to provide for the
automatic issuance of options in order to satisfy the requirements of
Securities and Exchange Commission Rule 16b-3. The Amendment provided for
the automatic issuance of stock options for 10,000 shares to each outside
director on July 26, 1996 and as of each June 30 thereafter. Also, each new
outside director is automatically granted stock options for 10,000 shares as of
the date of becoming a member of the Board, unless that date falls between
April 1 and June 30 of any year. These options become exercisable six months
after grant and expire three years after date of grant. The exercise price is
equal to the fair market value at date of grant, but not less than one dollar.
<PAGE>
On August 28, 1998 and August 27, 1997, the Board amended the Directors'
Plan by modifying the formula for granting options to outside directors by
providing for the annual grant of stock options for 10,000 shares in lieu of
regular cash compensation for serving as director. These options become
exercisable on the date of the next annual meeting of shareholders and have a
three year life.
As of December 31, 1998, 80,000 options had been granted under this plan.
Ownership of Capital Stock by Directors and Executive Officers
The following table sets forth, as of June 28, 1999, the shares of the
Company's Capital Stock beneficially owned by each 5% beneficial owner, by each
director or nominee, by each named executive officer individually, and by all
directors and executive officers as a group:
Number of
Name and Address of Shares Beneficially
Beneficial Owner Owned (1) Percentage of Class
- --------------- -------- --------------------
[S] [C] [C]
Robert and Catherine Burr(2)
5168 Renaissance Dr.
San Diego, CA 92122 734,582 5.69
Frederick Sandvick(3)
108 Ivy Street
San Diego, CA. 92101 2,650,000 20.45
John H, Olbrich(4)
3256 Loma Vista Dr.
Jamul, CA 91935 251,667 1.95
Ed M. Bacani(5)
8076 El Extenso Court
San Diego, CA 92119 20,000 .02
Richard C. Mahan
4640 Admiralty Way, Suite 216
Marina Del Ray, CA 90292 - -
All directors and executive 2,974,845 23.04
officers as a Group (5 persons)
- ------------------
(1) Unless otherwise indicated, all shares are owned beneficially and of
record.
(2) Of the shares of common stock reflected in the table above, 7,904 are
registered in Mr. Burr's name and 35,556 are held as community property by
Mr. and Mrs. Burr. The number includes 691,122 shares held by the Burr Family
Trust. Mr. and Mrs. Burr, as trustees of the trust, exercise sole voting and
investment control over these shares.
(3) Of the shares of common stock reflected in the table above, 40,000 are
registered in Mr. Sandvick's name. The number includes 870,000 options which
vested pursuant to Mr. Sandvick's employment agreement, warrants to purchase
500,000 shares of common stock in connection with a guarantee of a performance
bond and warrants to purchase 950,000 shares of common stock and options to
purchase 50,000 shares of common stock granted to Vanguard Strategies, Inc.
(See "Certain Relationships and Related Transactions" herein).
<PAGE>
The table also includes options to purchase 240,000 shares of common stock
granted to Mr. Sandvick in lieu of cash bonuses for 1997 and 1996.
(4) Of the shares of common stock reflected in the table above, 191,667 are
registered in Mr. Olbrich's name. The table includes options to purchase
60,000 shares of common stock.
(5) The number includes options to purchase 20,000 shares of common stock.
Executive Compensation
The following information relates to compensation of the Company's Chief
Executive Officer for the Company's fiscal years ended December 31, 1998, 1997
and 1996. No other executive officer of the Company received total annual
salary and bonuses in excess of $100,000 during those fiscal years.
The Compensation Committee did not have a substantial role in setting
compensation in 1998, 1997 and 1996 because the Chief Executive Officer was
engaged pursuant to an employment agreement which fixed compensation. The
role of the Compensation Committee and its policies are expected to increase
as employment agreements expire and compensation packages are negotiated with
key executives.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------- --------------------------------------------------
Securities
Underlying Long -Term All Other
Name and Principal Other Annual Restricted Stock Options/ Incentive Plan Compensation
Position Year Salary($) Bonus($) Compensation($)(1) Awards($) SARs (#) Payouts($) ($)
<S> <C< <C> <C> <C> <C> <C> <C> <C>
Frederick Sandvick 1998 255,000 85,500 0 0 290,000(3) 0 0
1997 141,000 0 7,243 0 0 0 0
1996 191,129 0 0 0 2,030,000(2) 0 0
</TABLE>
- --------------
(1) Reflects a car allowance to cover automobile expenses.
(2) Includes 870,000 options which vested pursuant to Mr. Sandvick's
employment agreement, warrants to purchase 500,000 shares of common stock in
connection with a guarantee of a performance bond and warrants to purchase
950,000 shares of common stock granted to Vanguard Strategies, Inc. (see
"Certain Relationships and Related Transactions" herein).
(3) Includes options to purchase 240,000 shares of common stock granted
to Mr. Sandvick in lieu of cash bonuses in 1996 and 1997 and options to
purchase 50,000 shares of common stock granted to Vanguard Strategies, Inc.
(see "Certain Relationships and Related Transactions" herein).
Employment Agreements
Mr. Sandvick serves as Chairman of the Board and Chief Executive Officer
of the Company pursuant to a three-year employment agreement commencing on
January 9, 1996. The agreement has been extended for three additional years
and will terminate unless further extended or sooner terminated, on December
31, 2001. The term of the agreement is automatically extended annually for an
additional year unless notice is given by either party that such party does
not wish to extend the agreement term. The agreement provides for an annual
base salary of $180,000 through June 30, 1996 with $30,000 annual increases
thereafter. The agreement provides for an increase in the annual base salary,
to at least $300,000 per year if the Company's pre tax income as defined, for
any calendar year equals or exceeds $2 million. Mr. Sandvick is entitled to an
annual bonus equal to 5% of the first $10 million of the Company's pre tax
income and 7% of the Company's pre tax income in excess of $10 million.
Pursuant to the agreement on the commencement of employment, Mr. Sandvick was
granted a ten-year option to acquire 870,000 shares of the Company's common
stock at a price of $.80 per share, such price representing the greater of (1)
the closing price on the date of stockholder approval of the First Amendment
to the Company's 1994 Stock Option Plan or (2) the average of the closing sales
price for the 20 trading days preceding the effective date of the agreement.
One-third of the shares subject to the option award became exercisable on
January 9, 1996 and one-third of the shares became exercisable over the next
two years in equal annual increments. Mr. Sandvick is also entitled to
participate in other employee benefit plans and the Company is obligated to
reimburse Mr. Sandvick for, or pay directly, the costs of a personal plan of
disability providing for $15,000 per month disability benefits.
<PAGE>
The employment agreement with Mr. Sandvick also provides for severance
upon termination by the Company without cause or termination by Mr. Sandvick
for "good reason" in the amount equal to the base salary Mr. Sandvick would
have earned during the 36 month period commencing on the date of termination
plus three times Mr. Sandvick's average annual bonus received over the prior
three fiscal years. Mr. Sandvick would also have the right to receive all
other benefits that would have been received under his employment arrangement
for that 36 month period. Further, all shares underlying outstanding stock
options granted to Mr. Sandvick would become fully exercisable for a period
of 18 months after termination. Mr. Sandvick shall have "good reason" to
terminate his employment if, among other events, (i) the Company fails to
comply with any material provision of the employment agreement; (ii) the
Company gives Mr. Sandvick notice of nonrenewal; or (iii) for any reason
within one year following the occurrence of a change in control, as defined.
Change in control occurs if (i) any person, excluding existing relationships,
becomes the beneficial owner of securities representing 20% or more of the
combined voting power of the Company's then outstanding voting securities;
(ii) a change occurs in the majority of the Board of Directors; (iii) the
stockholders approve a merger in which at least 51% of the Company's combined
voting power is given to a new entity not in the Company's control or the
effect of such merger is that any person acquires 20% or more of the combined
voting power of the Company. On January 27, 1997, the Company hired Michael
Wright to serve as the Company's President. Mr. Wright served as President
from January 27 to December 25, 1997, during which time Mr. Sandvick's annual
salary was reduced by $84,000.
Options Grants in Fiscal 1998
The following table represents certain information regarding stock
option grants to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
-----------------
Number of Securities Percent of Total Options
Underlying Options Granted To Employees in Exercise of Base Price Expiration
Name Granted(#) Fiscal Year(%) ($)/Share Date
- ---- --------- ------------- -------- ----
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederick Sandvick 240,000 43 $1.41 9/30/03
</TABLE>
Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values
The following table presents certain information regarding stock option
exercises during fiscal 1998 and fiscal year end option values.
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value of Unexercised
Acquired on Value Unexercised In-The-Money
Name Exercise (#) Realized($) Options/SARs at FY-End (#) Options/SARs at FY-End($)
---- ------------- ---------- ------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frederick Sandvick 0 0 2,320,000(1) 290,000(2) 2,788,420 119,040
- -------------
</TABLE>
<PAGE>
(1) Includes 870,000 options which vested pursuant to Mr. Sandvick's
employment agreement, warrants to purchase 500,000 shares of common stock in
connection with a guarantee of a performance bond and warrants to purchase
950,000 shares of common stock granted to Vanguard Strategies, Inc. (see
"Certain Relationships and Related Transactions" herein).
(2) Includes options to purchase 240,000 shares of common stock granted to
Mr. Sandvick and 50,000 options granted to Vanguard Strategies, Inc. in 1998
(see "Certain Relationships and Related Transactions" herein).
Bonus Policy
While the Company has no established policy, other than as provided in
the Chief Executive Officer's employment agreement, to award cash or stock
bonuses to its officers, it may elect to pay bonuses to reward the performance
of its officers. The Company awarded cash bonuses of approximately $108
thousand and $14 thousand in 1998 and 1997, respectively, to executives and
management, other than Mr. Sandvick. No cash bonuses were awarded in 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1995, Mr. Robinson, who was then an outside director of the
Company, loaned the Company $250,000 at an interest rate of 10% per annum
and secured by a certain lease agreement and related equipment. The
remaining principal and interest on this loan totaling $118,745 was paid to
Mr. Robinson in May 1997. Mr. Robinson received a warrant to purchase
25,000 shares of the Company's common stock at $2.50 per share as additional
consideration for the loan.
On January 8, 1996, the Company entered into an agreement with Vanguard
Strategies, Inc. ("VSI"), a private strategic planning company, in which VSI
would assist the Company as its exclusive consultant for at least 120 days in
negotiating debt and equity financing and in developing the Company's
strategic plans. Mr. Sandvick is the president and principal stockholder of
VSI. In January 1996 VSI assisted the Company in obtaining a $450,000 loan
from U.S. Mortgage Bankers Corp. ("USMBC"). The president of USMBC is
Mr. Sandvick's half brother. As compensation for these services, VSI was
granted warrants, subject to the Company receiving financing of at least
$1.5 million, to purchase up to 450,000 shares of common stock of the
Company at a price of $.60 per share exercisable for five years. In July
1996, VSI was granted an additional warrant to purchase 250,000 shares
of the Company's common stock at a price of $.69 per share pursuant to the
extension of the USMBC promissory note under this agreement. In January
1997, VSI was granted an additional warrant to purchase 250,000 shares
of the Company's common stock at a price of $.72 per share pursuant to the
extension of the USMBC promissory note under this agreement.
In connection with the engagement of VSI (an unaffiliated third party
prior to entering into the agreement) to raise capital for the Company and
pursue other business restructuring alternatives and the continuing
arrangements with Mr. Burr, VSI and Mr. Burr were provided an option to
purchase 80% (40% each) of a subsidiary to be formed to carry on the
Company's international operations. The option was provided to VSI and
Mr. Burr as an incentive for them to aggressively pursue international sales.
However, the subsidiary was never formed and on March 19, 1998 the Company
and VSI entered into an agreement whereby the original agreement with VSI
referred to above was terminated. Pursuant to the termination agreement,
VSI and Mr. Burr were each granted options to purchase 50,000 shares of
the Company's common stock at $2.88 per share, the closing market price of the
Company's common stock on such date. The options expire on December 31, 2002
and vest at the earlier of June 30, 2002 (subject to certain conditions) or
March 31 following the fiscal year end during which cumulative gross revenues
for fiscal years beginning in 1998 from customers in Central and South America
exceed $5,000,000.
PROXY ITEM NO. 2
APPROVAL OF AUDITORS
The Audit Committee has recommended that Deloitte & Touche LLP be
Appointed as the Company's independent auditors for the current fiscal year.
Representatives of the firm are expected to be present at the Annual Meeting
and will be available to answer questions. If the shareholders do not ratify
the appointment of Deloitte & Touche LLP, the Board of Directors will
reconsider the appointment.
<PAGE>
The Board of directors recommends a vote FOR approval of Deloitte &
Touche, LLP as independent auditors for the current fiscal year.
Other Matters
The Board of Directors knows of no other matters to be brought before the
meeting. If matters other than the foregoing should arise at the meeting, it
is intended that the shares represented by proxies will be voted in accordance
with the judgment of the person named in the proxy.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's common stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Based solely on
reports and other information submitted by executive officers, directors and
ten percent shareholders, the Company believes that during the year ended
December 31, 1998, each of those persons filed all reports required by section
16(a) in a timely manner with the exception of director Ed M. Bacani's initial
Form 3 which was filed late.
Shareholders' Proposals
The Company welcomes comments or suggestions from its shareholders. In
the event a shareholder desires to have a proposal formally considered at the
2000 Annual Shareholders' Meeting, and included in the Proxy Statement for that
meeting, the proposal must be received in writing by the Company on or before
December 31,1999.
General
The costs relating to this Proxy Statement, the Proxy and the Annual
Meeting are being borne by the Company. In addition to solicitation by mail,
employees of the Company may request the return of the proxies personally, by
telephone or telecopier. The Company will, on request, reimburse brokers and
their persons holding shares for the benefit of others for their reasonable
out-of-pocket expenses in forwarding proxies and accompanying materials and in
obtaining authorization from beneficial owners of the Company's stock to
execute proxies.
The 1998 Annual Report and 1999 first quarter report on Form 10-QSB have
been mailed with this Proxy Statement or previously delivered to shareholders
and do not form a part of the material for the solicitation of proxies.
Please complete, sign, and date the enclosed proxy card, which is
Revocable as described herein, and mail it in the enclosed postage-paid
envelope.
By order of the Board of Directors
Frederick Sandvick
Chairman of the Board and
Chief Executive Officer
